The similarities and differences between SIPPs and SSASs


The difference between a SIPP and SSAS is simple, right? One describes the way you drink wine, and the other describes the attitude your teenager has, which drove you to the bottle in the first place.

Sadly, we’re not here to talk about wine, or parenting tips for that matter, but pensions (that’s where our expertise lie, after all!)

So, let’s look at the details.

First, what do SIPP and SSAS stand for?

Before we get into the details, let’s start with the basics;

  • SIPP: Self-Invested Personal Pension
  • SSAS: Small Self-Administered Scheme

Second, what do SIPPs and SSASs have in common?

Both types of pension are regulated in the same way by HMRC, and are subject to the same tax regulations and reliefs, where contributions attract tax relief equal to the basic rate of 20%. Both, broadly, do the same thing; enabling you to save for retirement.

Third, what sets them apart?

So far, so similar. But SIPPs and SSASs have many differences which make them suitable for different people with different agendas. These include:

  • Who they’re for: SIPPs are personal pensions and are available for anyone. However, SSASs are small occupational pensions designed for the directors and higher employees of limited companies. Specially, directors that often want to use their pension to invest back into the business. SSASs tend to be set up for no more than 11 members.
  • How investments are controlled: Both offer members control over the investments made with their pension, SIPP providers have a duty of care to safeguard members against certain types of investments. This also means that they can limit the investments they allow access to.

SASS members face no such limitations. As the members they are typically all trustees of the schemes and are in control of the assets the fund is invested in. The risk of making bad decisions could be higher if the members are inexperienced or lack the necessary information.

  • Individual or group investments: Members of SIPPs have individual investments, that means that the decisions they make concerning the shares and assets they invest in will only affect them. However, for members of SSAS schemes, the responsibility is shared among the group. Rather than each member making personal decisions, the fund is invested as one and each member has a notional interest equal to their contribution to the fund.
  • Company shares: SIPP members can invest up to 100% of the fund in shares of any company or one they own, as unlike a SSAS they don’t have a sponsoring employer. SSAS members can only invest a maximum of 5% of their fund in a company they are connected to. They can also buy shares in more than one sponsoring employer, as long as the total market value at the time is less than 20% of the total scheme value.
  • Property & Lending: SIPP and SSAS arrangements can both be used to fund the purchase of commercial property. Loans are not allowed to any member or person of a SIPP but a SSAS permits a secured loan to the trustees, which can be used to fund business activities and other assets beyond property.
  • Regulations: The Pensions Regulator is responsible for regulating SSAS schemes, while SIPPs are subject to some of the regulations of The Pensions Regulator but is mainly overseen by The Financial Conduct Authority (FCA).
  • Protections: If a SIPP operator or provider goes out of business, members can claim compensation under the Financial Services Compensation Scheme, however SSAS members are not afforded this protection.

Finally, how do you know which one is right for you?

Talking to an independent financial adviser is important in this situation. By talking to us, you will benefit from unbiased advice which does not favour one type of pension over the other, we simply aim to find the pension solution which best suits your needs and circumstances.

So, to discuss your pension options, please get in touch with Sarah or Bev on 0115 933 8433.